George Osborne: austerity may last until 2018

George Osborne has signalled that austerity may need to continue until 2018 as he prepares to tell the Conservative party conference "the road is longer than anyone had hoped".

The chancellor outlined plans for a fresh round of £10bn of welfare cuts in 2015-16, saying: "You can't just balance the budget on the wallet of the rich".

As he prepared to give his keynote speech to the Tory conference in Birmingham on Monday, the Financial Times reportedthat Osborne was set to be told this autumn by the Office for Budget Responsibility he was likely to miss his supplementary target of a fall in the burden of public debt by 2015-16. If the recent weakness in the growth of the economy continues, the target will also be under threat in 2016-17, according to the FT.

Pressed during a round of broadcast interviews on Monday morning, Osborne refused to give a "running commentary" on whether targets for reducing accumulated debt would be met, saying the assessment would be made on 5 December by the OBR.

But the chancellor admitted the economy was "healing" more slowly than expected, and said his message to the conference was "we have got to finish the job" as he outlined further cuts in welfare spending.

Stressing that the budget deficit was down by 25% over two years, Osborne told the BBC Radio 4 Today programme: "The problems in our economy ran deeper than anyone feared. We have not been helped by the international situation and my message to the conference is that we have got to finish the job. These are very difficult decisions that any government would face at a time like this, but you've got to go on with a credible plan to reduce the debts and a credible plan to encourage enterprise in our economy.

"I'm saying that, yes, the road is longer than anyone had hoped. We've got to find more cuts, we've already pencilled in, already published plans for £16bn more cuts in the year 2015-16 – that's significant, by the way, because you have to set those plans before the next general election – and we have choices about how we make those savings, and one of the things I am saying today is that the rich need to contribute more, as they have in all my budgets, but you can't just balance the budget on the wallets of the rich."

Osborne said it was unfair some people on benefits "enjoy a lifestyle" those in work are unable to. "The Conservative party, the modern Conservative party, is on the side of people who want to work hard and get on," he said.

The first targets for cuts in the welfare budget are likely to be housing benefit for the under-25s and restraint on the uprating of benefits in line with inflation.

Osborne raised the prospect of cutting benefits for unemployed parents who have another child. The chancellor said it was wrong that families in work must consider the financial implications of having more children, while those on benefits "can be financially better off" by having children.

"What we're doing at this stage is asking a series of question of the country about welfare. One of the questions we ask is, when you're in work and you want to have another child, you have to consider the financial cost of that, because obviously it is an expensive thing to do, wonderful as it is to have more children. When you're on benefits you automatically get extra money when you have a child so you can be financially better off. We're just asking the question, does that work? Is that the right values we have in our society?"

Osborne defended targeting the poor while cutting the top rate of tax, from 50p to 45p. He said that it was the "poor looking for work" who had paid the price for the "phony 50p rate" because it had made the country "uncompetitive".

"That is a completely phony conception of fairness. That you have a rate of tax, introduced, by the way, in the last couple of weeks of a 13-year Labour government, that everyone knows raised no revenue, made this country uncompetitive, that cost jobs, that cost investment. The people who were paying the price for that phony 50p rate were actually the poor looking for work, not the rich. So I found other ways to tax the rich. We're clamping down on tax avoidance in a way that has never been done before in this country.

"So we are absolutely clear that those with the broadest shoulders must bear the broadest burden. But our conception of fairness, and this is perhaps where we differ from the Labour party, also extends to the welfare system. We also think it's unfair that when that person leaves their home early in the morning, they pull the door behind them, they're going off to do their job, they're looking at their next-door neighbour, the blinds are down, and that family is living a life on benefits. That is unfair as well, and we are going to tackle that as part of tackling this country's economic problems."